Yelp ‘Extortion’ Suit Dismissed, But Suspicions RemainBy: Chris Crum - September 3, 2014
Yelp has emerged victorious from an extortion lawsuit, but the reasons why have done little to quell existing suspicions about its business practices.
Various lawsuits have been filed against Yelp over the years, accusing the company of extorting small businesses by hiding positive reviews and showing negative ones in order to get businesses to pay for advertising. Beyond the lawsuits, there are many Internet comments alleging the same thing, and similar stories also told in the media.
None of this has ever been proven, however, and like others before it, a class action suit in California has been dismissed. The US Ninth Circuit Court of Appeals upheld the dismissal from a lower court in the case of Levitt v. Yelp, citing a lack of evidence.
Is the dismissal of this case sufficient to put accusations and suspicions to rest? Tell us what you think.
Marketing Land shares the legal document:
For years, fringe commentators have accused Yelp of altering business ratings for money. Yelp has never done this and individuals making such claims are either misinformed, or more typically, have an axe to grind––whether businesses upset that Yelp will not remove reviews they don’t like, or unscrupulous internet marketing “experts” trying to make a buck off of honest business owners with dubious reputation management schemes.
In 2010, a few businesses took these conspiracy theories to court and filed several class actions against Yelp — all of which were dismissed in Federal court. Today the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of these cases with their ruling in Levitt v. Yelp. Examining the businesses’ best facts after several attempts, the court found no extortion or any other wrongdoing by Yelp. The Court also dismissed as implausible some plaintiffs’ claims that Yelp authored negative reviews about them as part of a plot to obtain ad dollars. Instead, the Court noted that the facts only showed that the reviews were likely from actual customers, noting that “Yelp is a forum for consumers to review businesses, and huge numbers of consumers do just that.”
We are obviously happy that the Court reached the right result, and saw through these thin attempts by a few businesses and their lawyers to disparage Yelp and draw attention away from their own occasional negative review. We at Yelp are moving on, and focusing on our core mission––connecting people with great local businesses.
While Yelp obviously considers this a victory, some in the media have pointed out that the reason for the case’s dismissal doesn’t really prove that Yelp hasn’t engaged in some of the things it’s been accused of.
As Nathaniel Mott at PandoDaily puts it, “Yelp’s extortion charges have been dropped, but that doesn’t mean the company’s innocent.”
“Others have pointed out, however, that the court’s decision was based less on Yelp’s innocence in the common sense of the word and more on the fact that these businesses never had a ‘right’ to positive reviews in the first place,” he writes. “Yelp isn’t necessarily innocent — it’s just not guilty in a way the appeals court cares about.”
Courthouse News Service reports:
Yelp’s alleged conduct cannot be called extortion because its “manipulation of user reviews, assuming it occurred, was not wrongful use of economic fear, and, second, … business owners pled insufficient facts to make out a plausible claim that Yelp authored negative reviews of their businesses,” the three-judge panel found.Emphasis added.
“In sum, to state a claim of economic extortion under both federal and California law, a litigant must demonstrate either that he had a pre-existing right to be free from the threatened harm, or that the defendant had no right to seek payment for the service offered,” wrote Judge Marsha Berzon for the three-judge appellate panel. “Any less stringent standard would transform a wide variety of legally acceptable business dealings into extortion.”
Yelp also faces a class action suit from its own shareholders who have alleged that the sold over $81 million in stock while misleading them about the legitimacy of reviews.
On that note, the company just issued a new round of Consumer Alerts, revealing that it busted some businesses bribing reviewers through messaging on Yelp itself. In another blog post, Yelp wrote:
For example, imagine you were considering using Atticare, a home cleaning company in New Jersey, or JCA Mechanical Plumbing & Heating in New York City, each of whom were the subject of private messages through Yelp offering money or gift cards in exchange for reviews on Yelp. Or if you decided to buy a car from Hooman Nissan in Long Beach, CA, where an employee was caught sending messages to Yelp users offering Clippers tickets in exchange for a 5-star review and even requested including his name in each review. In Las Vegas, Yelp’s detective team found that more than 50 reviews for towing company AAA Anytime INC came from the same IP address, indicating that someone may have been trying to goose their rating. And what’s worse, this is the third time we have warned this particular company about their behavior with a Consumer Alert. Those 50+ new reviews have been submitted since their last alert in February of this year.
If nothing else, this seems to suggest that Consumer Alerts do little to deter businesses from engaging in this kind of behavior. Yelp said itself that this was the third time one business was slapped with an Alert, and that it found over 50 new questionable reviews just since February. It might, however, deter businesses from using Yelp’s messaging to try to get fake reviews.
Here’s one of those “private” messages Yelp shared on its blog:
“These businesses may actually be providing great products and services, but that’s really what their Yelp rating should be based on, not fake reviews,” writes Yelp’s Rachel Walker. “That’s why Yelp goes to such lengths to protect consumers from this behavior in the first place and inform them of it as well. The good news is that Yelp’s team caught this behavior. We just think consumers have the right to know what’s happening behind the scenes when deciding what businesses to patronize.”
Interestingly, Union Street Guest House managed to escape any consumer alerts in this round. As you may recall, last month the hotel came under fire after it was discovered that it had a policy to charge wedding parties for any negative reviews left by guests in attendance.
A Yelp spokesperson told WebProNews at the time, “For 10 years, Yelp has existed as a platform to alert consumers of bad business behavior such as this.”
To our knowledge the hotel’s Yelp page has never carried one of Yelp’s official consumer alerts, though Yelp did remove a number of negative reviews that were left by people who learned about the hotel’s policy and retaliated. There are still plenty of negative reviews on the hotel’s page, including those mentioning the controversial policy. One even makes a point to say in the review that they’re using a 2nd Yelp account to leave the comments.
Do you believe Yelp holds positive reviews hostage to get businesses to advertise? Do you believe they misled shareholders about review legitimacy? Share your thoughts in the comments.
Image via Yelp (Flickr)